I move: "That the Dáil agree with the Committee in the said Resolution." It will be remembered that Section 26, Part III, of the Finance Act, 1931, was designed to check the loss of estate duty in the case of "settled property," that is to say property in which the holder has a life interest only, transferred to a "private" company under such conditions that the property does not "pass" on the death of the life tenant; but, at the same time, the life tenant has not, in fact, divested himself wholly of an interest in it or an equivalent thereof. Possibly I might explain this better by an example. Property settled on A for life, passes to B finally on A's death. A and B form a private company, to which they both transfer their respective interests. A receives from the company an annuity virtually equal to his present income from the property and practically all the shares in the company are allotted to B. Before the 1931 Finance Act became law the property in such a case did not "pass" on A's death and no estate duty was payable accordingly. Section 26 of that Act provided that where property in which the deceased had an estate or interest limited to cease at his death had been transferred by the deceased and the person interested in the remainder or reversion to or for the benefit of a company to which the section applied, such property should be deemed to "pass" on the death of the life tenant and so become liable to estate duty, subject to certain conditions prescribed by the section—with which conditions we are not interfering.
Cases involving a very large amount of duty have recently arisen in which only the life tenant and an expectant life tenant have transferred their interests to a company, the ultimate remainder man not having transferred his interest. In these the property was settled on A for life, to pass on his death to B for life, and on B's death to C, the ultimate remainder man, who did not transfer his interest to the company, so that a continuous chain of evasion might be constituted. We have been advised that in such cases the revenue claim for duty could not be pursued with any reasonable chance of success under the existing legislation, the view being taken that it is only where the whole property, inclusive of all interests—inclusive not merely of A and B's interests, but of C's interest and of the interest of any other person who might succeed to an interest in the estate—has been transferred to a company that Section 26 of the 1931 Act becomes operative.
The amount of duty lost in cases of this kind may be very large. Furthermore, it would be possible, as I have indicated, to effect arrangements with a view to further and continuous legal evasion in the future. It is, therefore, intended to legislate as in this Resolution to stop evasion of that kind. The effect of the Resolution will be to provide that where the estate or interest of the deceased in any property limited to cease at his death—that is on the death of the life tenant—and the estate or interest in such property of the person entitled expectantly on the death of the deceased limited to cease at the death of such person (the expectant life tenant) are transferred to a company the property shall, subject to certain conditions, be deemed for the purposes of estate duty to pass on the death of the deceased. That is to say that where there are only one or two interests or more of the existing interests—in short whether or not all the interests are transferred to this company—the property will be deemed to pass at the death of the person who has a first interest or, subsequently, of a person who has any remaining interest in turn on his death, and so that the property will be made subject to estate duty as if passed in the ordinary way.
